Downtime, failures and errors - Understand their true costs (2023)

Downtime, failures and errors - Understand their true costs

• 11. April 2019
• Written by: Gad Cohen

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When it comes to mission-critical applications or data center performance quality, companies are willing to make huge investments. Unfortunately, these investments do not always deliver full performance.

Handles system downtime

Despite the efforts that have been put into infrastructure resilience, many IT organizations continue to deal with database, hardware and software downtimes lasting from just a few minutes to several days, completely crippling the business and causing huge losses cause.

Downtime is expected

A world of IT outages can sometimes seem uncomfortable.

Despite the variety of advanced solutions and the growing amount of data being collected by major software vendors and IT departments (from ERP to CRM and more), outages are still a valid and frightening threat to the industry.

On the other hand, IT failures have somehow become an accepted, even expected, part of corporate life.

This is counterintuitive...

IT downtime revised

While IT professionals experience downtime from time to time and are fully focused on overcoming it, the business organization as a whole suffers the "financial pain" of the impact, which is usually very significant.

Previously, we delved deeply into the many ways IT downtime can impact the bottom line of organizations (you can read more about it here –Cost and scope of unplanned outages). We looked at various aspects, from direct sales losses and damage to reputation to indirect effects such as reduced productivity.

Now, I want to revisit the issue and examine how organizations should address and assess threats to their IT operations, including systems, applications and data, by analyzing robust (and established) benchmarks that represent the potential costs of downtime and outages .

System Interruptions:
Measurement of major fire failures

When will the industry start measuring the financial impact of major fire outages like the recent one?Facebook, Theone that affected hundreds of thousands of Lloyds Bank customers, or theJetstar failurewhich led to hundreds of flight delays?

In other words, when is an outage "significant enough" that a cost analysis becomes valuable for the industry to learn from and predict the impact of future outage events?

Well, apparently at some point the fallout creates an impact that PR-wise can't ignore. It is the point of no return followed by financial consequences.

The cost of downtime varies significantly between industries. The size of the respective company is of course a critical factor, but not the only big one. The role of IT systems in the company is also central.

Putting a numeric value behind an IT outcome means pre-defining its impact across multiple business and organizational aspects so the entire industry can learn and optimize accordingly.

A failure in a critical application can result in two different types of losses:

• Application service outage – the impact of downtime varies by application and organization;
• Data Loss – The potential loss of data due to a system failure can have significant legal and financial consequences.

Well, I'm sure you'll agree that today's data centers must never go down; Applications need to be available 24/7, and internal (let alone external) end users worldwide need to be able to rely on data center availability (for critical data and application availability) at all times.

Well, reality bites. This is not the case in the back office (i.e. within the data center). No organization enjoys 100% uptime. Should you strive to achieve 100%? Naturally. But you should also develop a deep understanding of the impact of downtime and ways to minimize it.

Worst Breakup Nightmare Ever? Probably what happened to you...

Some previous outages have turned into PR disasters, like the mythological Virgin Blue debacle of 2010 or the most recent one that ravaged Facebook.

Why? Crowd influence probably had something to do with it.

As a reminder, Virgin Blue's outage prevented passengers from boarding flights for 11 days (!!), resulting in negative press, damaged reputation and lost millions of dollars.

More specifically, Navitaire, Virgin Blue's reservations management company, eventually compensated Virgin Blue for more than $20 million (Navitaire booking error brings Virgin $20 million into compo).

There are many other incidents that still attract media attention. Here's just one of the latestUSA Today article about Wells Fargo outagewho prevented customers from accessing their accounts for many hours.

It's safe to say that everyone in IT will agree that outages or downtime are VERY bad for business. They are undesirable, economically very harmful and must be combated with all available means.

Misconfigurations are key

The IT Process Institute's Visible Ops Handbook previously reported that "80% of unplanned outages are due to poorly planned changes made by administrators ("ops") or developers" (Visible operations).

The Enterprise Management Association reported that 60% of availability and performance failures are due to misconfigurations.

What does it cost?

Downtime can cost organizations $5,600 per minute and up to $300,000 per hour in web application downtime (according to a2014 Gartners Analyse).

The average hourly cost of enterprise server downtime worldwide, 2017-2018:

Those:statesman

Application maintenance costs are increasing at 20% annually. But it cannot solve all your problems. A previous industry survey found that at least a quarter of respondents' downtime was caused by configuration errors. (How much will you spend on application downtime this year?).

How common is downtime or breakdowns?

Ok, downtime can be a financial nightmare. This part is done. However, if you want to properly assess the risk potential of a disruption to your business, the immediate question should be, "How likely is it to happen?"

Those:Data center knowledge

Ok, so breakouts are way too common to be ignored by thinking, "I probably won't have a bigger breakout." Now the question arises as to how you can calculate the specific risk for your company.

Production and application costs clarified

Unplanned outages must be resolved by IT. Nonetheless, and as previously mentioned, these disruptions ultimately affect the entire organization.

An important part of a thorough disruption risk assessment is estimating how much money you will lose per hour (or minute, or other time interval of your choosing) in the event of downtime.

For businesses that rely solely on data centers' ability to provide IT and network services to customers -- such as telecom service providers or e-commerce companies -- downtime can be particularly costly, with the highest cost of a single event reaching $1 million (more ) exceed $11,000 per minute) according to expert estimates.

In a USA Today survey of 200 data center managers, over 80% said their downtime costs exceeded $50,000 per hour. Over 25% reported downtime costs in excess of $500,000 per hour (!!).

According to another study, while companies cannot achieve zero downtime, one in ten companies states that their availability must be greater than 99.999%.

Those:Searchcio Techtarget

To get a thorough understanding of the impact of production and release downtime, let's take a look at how the consequences of downtime manifest themselves.

Downtime costs - per year or per incident?

INSurvey 2017found that 46% of 400 IT decision makers experienced more than four hours of IT-related downtime over a 12-month period; 23% said they had costs between $12,000 and more than $1 million per hour.

Over 35% admitted they are unsure of the cost of an outage to their business.

If you ask Delta Airlines, which canceled 280 flights in 2017, the losses from a single disruption eventcan reach over 150 million dollars.

A few years ago, Dun & Bradstreet reported that 59% of Fortune 500 companies experience at least 1.6 hours of downtime per week.

If you take the average Fortune 500 company (or any company with at least 10,000 employees) and assume that they pay an IT team an average of $56 an hour, then (assuming all IT is busy with downtime ) the labor alone being a part of the downtime for a company this size would reach $896,000 per week, which is more than $46 million per year (Assessing the financial impact of downtime).

Of course, the reality is more complicated since you have to take into account many parameters such as the timing of the event (mid-week or weekend? day or night?) and more. However, understanding the cost of downtime greatly helps in assessing your risk potential and the ROI of tools that can help minimize the impact of downtime.

Has the industry been able to learn from the past and minimize collateral damage in the event of an outage?

How have things changed from before?

So we already know that downtime and outages are still happening today and the industry has yet to successfully eliminate them. But how have their costs changed over time? Are these incidents less harmful today?

I 2010a study by Coleman Parkesfound that IT downtime costs organizations a total of more than 127 million man-hours per year – an average of 545 man-hours per year. Company - in employee productivity.

In 2009, it was reported that the average cost of downtime varies significantly by industry, from about $90,000 per hour in the media sector to about $6.48 million per hour for large online brokers (How to quantify downtime).

According to a survey of IT managers conducted over the past few years, companies are becoming more aware of the direct financial cost of computer failures. The study found that one in five companies loses $12,000 an hour due to system downtime (How to quantify downtime).

As mentioned above, later analysis conducted by Gartner in 2014 found average costs of $5,600 per minute and over $300,000 per hour.

As early as 2004, a conservative estimate by Gartner put the hourly cost of computer network downtime at $42,000. Therefore, a company that suffers an above-average 175 hours of downtime per year can lose more than $7 million annually. But the cost of each disruption affects every business differently, so it's important to know how to calculate the exact financial impact (How to quantify downtime).

It makes sense to think that the cost of outages will only increase over time (since we all rely more on data systems today). You can therefore understand why past dates can be multiplied by a significant number to reflect today's reality...

Every minute counts

Over a decade ago, the average cost of a data center outage was estimated to be approximately $5,600 per minute across industries (Unplanned IT outages cost more than $5,000 a minute), a number accgardener, remained the same until 2014. The Ponemon Institute predecessor study referenced above calculated the minimum, mean, mean, and maximum cost per minute of unplanned outages, based on inputs from 41 data centers. The largest cost of an unplanned outage has been found to exceed $11,000 per minute.

On average, the cost of an unplanned outage is likely to be over $5,000 per minute.

It will only gain in importance

INSurvey 2013recorded an increase of over 41% over the previous averages described above and an average price of more than $7900 per minute.

AITIC survey 2015has clearly shown that hourly costs have increased by 25% to 30% (compared to 2008 data).

Impact of downtime per year

A previous analysis by Gartner calculated that downtime can reach an average of 87 hours per year. It is of course the sum of many results - anything from a few minutes to several hours (An average large enterprise experiences 87 hours of network downtime per year).

How have things changed?

One laterResearch from 2011revealed that while the industry has managed to combat the downtime epidemic and reduce its frequency, we are still seeing significant downtime and huge revenue losses (Source:resulted in over 3 million (apparently Whatsapp users) migrating to Telegram)

Impact on reputation and loyalty

How much is your company's reputation worth? This can be extremely difficult to assess, as can the long-term impact of a damaged reputation and its impact on sales and profitability.

In this case, the cost of failure includes lost customers (both short- and long-term) and other tangible assets that reflect the cost of reputational degradation, such as B. inventory declines, marketing times (crisis management and brand recovery) and the media budget required for the restart and brush up. the profile of an organization.

Which parameters should influence your calculation?

When trying to estimate the cost of downtime, there are the obvious direct costs (e.g., lost business during the downtime). However, many indirect costs, such as the overhead or reputation issues mentioned above, should also be considered.

Personnel costs derive from the cost of burning "war room" tasks focused on getting the IT systems back up and running, the cost of delays in all other scheduled tasks, the cost of staff overtime (if applicable ) and more. Add to this the value of data loss, emergency maintenance fees (especially if the outage occurs outside of business hours), and additional repair costs that can persist long after service is restored.

Of course, you need to take these costs into account when evaluating the impact of downtime, as they are usually very significant. But even a rough estimate can prove extremely helpful in understanding the risks and deciding what level of technology to lean on to combat them.

There's also the impact of lost sales. To get an accurate estimate of total lost sales, the impact rate needs to be increased to reflect the true lifetime value of customers who permanently switch to a competitor. For example Facebook (and Whatsapp) as I mentioned beforeUnconscious Cost: Denies the true cost of network downtime. How much revenue will be lost if these users are shown fewer billable ad impressions?

The stock fell 25%

Although it is difficult to quantify so many parameters, they are nonetheless significant and significant. For example, when Amazon.com went offline for several hours in the early days, the stock fell 25% in a single day (Unconscious Cost: Denies the true cost of network downtime)!

HappyAmazon SkyudfaldFor example, the company continued to struggle to bring its cloud services back online. As a result, many customers questioned the reliability of their cloud and how Amazon communicated about the outage. Other customers felt they should be compensated for the downtime as part of their SLA.

I know you're curious: As for the SLA, Amazon's EC2 SLA was not breached despite nearly four days of outage (Seven lessons to learn from Amazon's disruption).

Downtime costs: Calculate them yourself

How much do you have to lose from an unexpected server or business application failure?

According to multiple sources, the easiest way to calculate potential lost revenue during a power outage is to use this equation:

How do you minimize the risk of breakdowns and downtime?

Downtime and failures are catastrophic, but they don't have to be that big of an impact. By using solutions that focus on getting to the root of the problem, failures can be prevented before they even happen.

Evolved change analysishas developed a unique AIOps solution that focuses on change - the real cause of performance incidents. Evolven helps enterprise IT and cloud ops teams prevent and remediate incidents before problems arise.

Contact usto see how we are helping leading companies reduce incidents and MTTR.